Spending habits are changing in the isolation economy, with a shift in spending focus during lockdown.
New research from Legal & General and the Centre for Economics and Business Research (CEBR) found that spending habits in the isolation economy have changed by as much as £12.9 billion a year.
This shift in spending habits is largely as a result of our increased spending during the lockdown on four key categories at home.
The four big areas of at-home spending are groceries, alcohol, entertainment, and hobbies and crafts.
Despite a big shift in spending habits, we are collectively spending less in the isolation economy, spending on average £17.9 billion a month less in the wider economy, due to the Covid-19 pandemic.
When the lockdown was announced on 23rd March, we started spending an average of £104 each a week on the top four isolation economy categories, up 5% from pre-crisis spending.
This means we spent an extra £247 million each week on groceries, alcohol, entertainment, and hobbies and crafts.
Those aged 35-54 were the biggest contributors in terms of spending in the top four categories, spending an average of £170 million each week on these four key sectors.
But, despite a £12.9 billion change in where we spend our money, households in the UK are spending an average of 31% or £4.1 billion each week less during the lockdown.
Nigel Wilson, CEO at Legal & General, said:
The COVID-19 crisis is creating fundamental changes to how we work, live and how we spend both our money and our time. Businesses should prepare for lasting change to the consumer economy and falling levels of demand that other areas of the economy will need to step up to fill. Billions will need to be invested in new growth industries like health, well-being and life sciences to replace falling spend and fewer jobs in traditional face-to-face consumer industries like travel, physical retail and hospitality.
With job losses and many employees on furlough, as well as the absence of many costly activities during the lockdown, it’s little surprise to see spending fall by this extent.
For those who have not experienced a cut in household income, spending in the four isolation economy categories has risen by an average of 10% during lockdown.
It’s spending on takeaways and fitness-related activities that have fallen the most during the lockdown.
Spending on takeaways fell by 27%, with fitness activity spending down by 14% since March.
Nigel Wilson continues:
The Isolation Economy is a new feature of our daily lives and now encompasses some £13bn a year of the consumer economy. As the hub of the Isolation Economy, the home is becoming a more flexible space, doubling-up as a place for schooling, work, fitness and entertaining – and we can expect changes to the way we think about and design homes for future homeowners.
Despite spending less on fitness activities, we are collectively spending more time on exercise and wellness.
On average, people are spending an extra 20 minutes a week on exercise and wellness activities, compared with levels before the lockdown.
Streaming entertainment on platforms including Netflix and Disney+ has risen dramatically, with adults spending on average 2 hours 22 minutes more each week watching television.
Our time spent on video chat platforms, including Zoom, is up by 2 hours per week per person.
It’s interesting to consider which is these behaviour and spending changes will stick once the lockdown is lifted, forming part of the ‘new normal’.
In their report, Legal & General and CEBR found that more than two-thirds of respondents plan to continue cooking more of their meals at home.
More than half say that will stay in touch with friends and family via video calls, and nearly half said they will continue with their at-home workouts.
Nigel Wilson concludes:
COVID-19 is a huge challenge and a wake-up call for everyone. Health and well-being will become more important components of inclusive capitalism, and some elements of the new Isolation Economy with different consumer spending patterns are likely to endure even as social distancing is eased.
The research found that local economies and businesses could stand to benefit as a result of this shift in consumer behaviour.
60% of those responding to the survey said they plan to continue buying from local retailers once the lockdown is lifted, with 82% confirming that the coronavirus pandemic has highlighted to them just how important it is to have a stable supply of locally produced food and goods.